Why Practical AI is Critical for Retailers in 2018

Last year saw a lot of change for the retail industry. Brands that have been household names for decades closed their doors or filed for bankruptcy as pure-play e-commerce newcomers entered into the fray and found immense value in opening up their own physical stores.

The term “retail apocalypse” also became ubiquitous, and artificial intelligence (AI) was once again touted as everything from the savior of retail to the reason civilization will collapse.

As we inch further into 2018, some of these factors will influence what will become important retail trends this year. One of the most important factors is retailers’ interest in AI, which piqued in 2017. In fact, a Forrester study from last year found that 51 percent of brands are implementing, have implemented or are expanding their use of AI.

In the emerging technology hype cycle of 2018, we will discover whether AI is at the peak of inflated expectations, the slope of enlightenment, or both. We’ll also learn if the available AI-powered solutions are blowing smoke or are actually solving retailers’ personalization challenges.

What is Practical AI?

Practical AI is the valuable application of intelligence rendered by machines. It's rooted in present-day use cases, and separate from the futuristic promises and predictions of what AI may be able to accomplish.

The term artificial intelligence has undergone vast changes in its scope since its initial use. And as the field has expanded, two phenomena have played particularly important roles in understanding what it means — the emergence of the AI effect and AI in popular culture.

Practical AI grew as a result of how the AI effect and AI’s portrayal in popular culture led to a distorted purchasing and selling environment where vendors of AI-powered solutions felt the need to lean into and leverage pop culture’s use of the term, and customers found it increasingly difficult to separate the signal from the noise.

On the vendor front, this has led to many solutions providers AI-washing their product. As Sol Rashidi, chief data and cognitive officer at Royal Caribbean International put it, everybody wants to put their technological solution “under the AI umbrella just because there’s a bit more glamor to it.”

Why is Practical AI Important?

Earlier I mentioned that this will be the year we learn if AI-powered solutions actually deliver the results that retailers and consumers expect. The companies shouting the loudest about AI will be forced by retailers to put up or shut up, which means they’ll need to show accessible and transparent examples of how AI is driving revenue, stronger customer engagement, and better customer experiences on-site and off.

For many reasons, this is why practical AI is so important; it breaks free from the fun-to-discuss future manifestations to offer an immediate look at what can help the public (including consumers and vendors) right now.

In a recent article in Gigaom, Rudina Seseri, founder at Glasswing Ventures, echoed words similar to Sol Rashidi: “AI has now become a buzzword. Startups work AI into their pitches even if their businesses aren’t really oriented around the technology.”

The best way to move beyond buzzword is to understand a few practical AI examples.

Practical AI Examples

The most practical real-world applications of AI, according to Erik Brynjolfsson and Andrew McAfee of MIT, fit into two categories: perception and cognition.

Voice commerce and image recognition are prime examples for perception. Alexa, Siri and Google Assistant have paved the way for voice commerce, but its democratization is underway. Many online retailers are powering their on-site search functionality with technologies (e.g., Natural Language Processing) that can easily respond to longer, more expressive search queries. Beyond simply being a cool feature, there’s value in the practicality of it.

Currently, speech recognition is about three times faster than typing on a cell phone, and this speed gap is increasing rapidly, which means customers are moving toward voice as a way to find what they’re looking for. This can lead to some big wins for retailers that are prepared.

Similarly, image recognition is changing entire industries. It’s helping doctors improve the accuracy and speed at which they can detect cancer, and it’s opening up new educational possibilities for everybody, everywhere. Again, there will be immediate and longer-term benefits for digital merchandisers that are opening up search functionality by enabling consumers to search by photo.

Ultimately, practical AI is about what’s valuable right now. While peering into the future is exciting and can be valuable, it can also distract us from seeing the use cases that are already available.

Kurt Heinemann is chief marketing officer of Reflektion, an artificial intelligence-driven customer engagement platform.